Authors: Steven Kent
The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World (34 page)
On April 28, Universal sent telexes to Nintendo and Coleco, claiming “sole and exclusive ownership of all rights (except book publishing rights) in and to the name, title, character, and story ‘King Kong’ and ‘Kong’ … including, without limitation, the right to exploit, license and sell games, toys, video displays and other forms of merchandising based upon or using the ‘King Kong’ name, title and character.”
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Sheinberg demanded that Nintendo and Coleco stop marketing
Donkey Kong
, destroy all
Donkey Kong
inventory, and submit a complete account of profits made through the game. He also threatened to take the case to court if both companies did not settle within 48 hours.
After considering his options, Greenberg decided to back down. Universal Studios was so big and its legal resources were so vast, he could see no way to stand up to it in court. By May 5, Greenberg agreed in principle, obligating Coleco to pay royalties to Universal. The formal agreement was signed one week later.
Arnold was very concerned, so he signed a deal with Universal, which was really a strange deal. It was a covenant not to sue. It wasn’t really a license agreement for Universal. Arnold started paying royalties on any shipments of
Donkey Kong
to Universal in exchange for Universal’s pledge not to sue Coleco.—Al Kahn
Hiroshi Yamauchi, president of Nintendo Co. Ltd. in Japan, was baffled and angered. First Nintendo could not penetrate the U.S. market. Now that it had, an enormous and powerful company was threatening to sue him.
Nintendo and Coleco were not the only companies that received threatening messages from Universal. When Robert Hadl discovered the licensing agreement with Tiger Electronics, he angrily called a meeting with Loretta Sifuentes.
He was upset upon learning that Universal had licensed Tiger, and “wanted to know on what basis [Universal] had made a license,” noting the Tiger agreement to be a lousy license because it offered only a small return to Universal and because its exclusivity provision could prevent Universal from concluding its agreement with Coleco.
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On May 4, Sheinberg sent a mailgram to Tiger Electronics, threatening to terminate its licensing agreement unless Tiger submitted its game for approval. Tiger sent materials explaining the game the following day.
Minoru Arakawa and Howard Lincoln flew down to represent Nintendo in a meeting with Coleco and Universal Studios on May 6. Robert Hadl restated the claim that
Donkey Kong
infringed upon Universal’s trademark for King Kong. Lincoln responded that Nintendo had run a trademark search and found numerous unlicensed uses of “King Kong,” and that he had discovered that Universal had only applied for the name within the last decade.
Greenberg did not inform Arakawa and Lincoln about his arrangement with Universal. Instead, he urged Arakawa to sign an agreement with Universal.
I didn’t realize that Coleco had already cut a deal with them behind our back, prior to the time we had the first meeting. We were puzzled by how Coleco kept pushing for an agreement. We knew that we had drafted the agreement with Coleco such that we didn’t have any liability vis-à-vis Coleco, but we suspected that Universal didn’t know that.
—Howard Lincoln
The day after their meeting with Nintendo, executives from Universal discussed purchasing $30 million of Coleco debentures in a separate meeting with Coleco executives.
Sheinberg canceled Universal’s marketing agreement with Tiger Electronics on May 8, stating that the proposed King Kong game was substantially similar to
Donkey Kong.
Rissman not only refused to let Universal terminate the agreement but also in a later letter began questioning Universal’s ownership of the name.
During the May 6 meeting, Robert Hadl said he would have a document—a chain of title—sent to Nintendo. The chain of title was important because it would establish Universal’s claim on King Kong. The document did not arrive.
Howard Lincoln called Hadl the following week, asking for the chain of title. Hadl restated his demand that Nintendo pay Universal royalties on
Donkey Kong
but did not send a chain of title.
Minoru Arakawa had great faith in Howard Lincoln. Based on Lincoln’s recommendation, he chose to fight Universal rather than settle out of court. The decision could have cost Arakawa his job. Even when his father-in-law, Hiroshi Yamauchi, questioned this decision, Arakawa continued to support Lincoln.
The next time that Arakawa and Lincoln met with Universal was a luncheon at Universal Studios. Lincoln and Arakawa called Hadl and said that they wanted to set up a meeting. Hadl arranged a small luncheon with the Nintendo executives and Sid Sheinberg on May 21, believing that Nintendo was ready to concede Universal’s ownership of King Kong and settle the dispute. He was wrong.
Mr. Arakawa and I decided that we would go down and simply tell him that we’ve come to tell you to your face that we would pay you if we thought we were liable, but we had done our homework and we were not prepared to pay anything because we hadn’t done anything wrong. We just wanted to essentially look him in the face and tell him that. It seemed to be the honorable thing to do.
As it turned out, maybe Hadl had led him [Sheinberg] to believe that we had come down to reach some type of a monetary settlement with him. And it was really funny because it was not what he was expecting and his reaction was shock.
—Howard Lincoln
Lincoln and Arakawa had decided not to give in to Universal’s demands, even if it meant that they would have to present their case in court. Lincoln had researched Universal’s claim and come to the conclusion that the claim on King Kong was weak at best. If he was right, Universal Studios’ lawyers would not be able to win in court, despite their unlimited legal resources.
Arakawa, Lincoln, Hadl, and Sheinberg had a quiet meal at Universal Studios. As the lunch finished, Sheinberg, possibly hoping to win over Arakawa the same way he had enticed Greenberg, mentioned that Nintendo might have future business dealings with Universal after settling the
Donkey Kong
affair.
Lincoln responded with a calculated and unflinching statement, telling Sheinberg that after a full investigation, he did not accept Universal’s claim to King Kong and that Nintendo would not pay the studio royalties on
Donkey Kong.
Sheinberg exploded. “You’d better start saving money to pay your attorney’s fees,” he shouted, then added that Universal was very litigious and that the “litigation department even turned a profit.”
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Realizing that the case would end up in court, Hadl reopened discussions with Tiger Electronics, stating that Universal would consider issuing a nonexclusive license to Tiger if it altered its
King Kong
game by: (1) putting a fire hat on the hero character; (2) replacing the barrels the ape was throwing with bombs; and (3) making the floors of the building the hero was climbing horizontal instead of slanted. These changes were supposed to differentiate Tiger’s
King Kong
game from
Donkey Kong.
O. R. Rissman demonstrated the new game to Hadl at a Sears store in early June, and the changes were approved.
On June 29, 1982, Universal filed suit against Nintendo, claiming that Universal Studios owned all rights to King Kong by virtue of agreements with RKO Pictures, Inc., the studio that made the original
King Kong
movie, and the heirs of Merian C. Cooper, the man who wrote
King Kong.
That same day Universal also announced its licensing agreement with Coleco.
Sheinberg’s attack did not stop with the lawsuit. By this time, Nintendo had grossed more than $180 million from sales of approximately 60,000
Donkey Kong
arcade machines. Nintendo had also licensed the
Donkey Kong
name and character to more than 50 companies, for everything from cereal boxes and board games to Saturday morning cartoons.
Determined to make an example out of Nintendo, Universal obtained a list of all of Nintendo’s licensees, contacted them, and threatened them with liti
gation if they did not abandon their relationships with Nintendo. The only licensee that stayed with Nintendo was Milton Bradley, whom Universal never took to court.
As they prepared for their day in court, Howard Lincoln and John Kirby, the lawyer that would represent Nintendo in court, flew to Nintendo’s Japanese headquarters to take depositions. At this time, Lincoln first met Hiroshi Yamauchi. He also took statements from Shigeru Miyamoto, the man who had designed
Donkey Kong.
I met Mr. Miyamoto in connection with the
Donkey Kong
litigation on my first trip to Kyoto. I was such a poor international traveler…. My car stalled on the way to the airport and I almost missed my plane. Then I checked my bags to Tokyo, even though we were going to Osaka.I got to Kyoto and met Mr. Yamauchi for the first time. And it was in connection with the litigation that I first met Mr. Miyamoto. He was a young guy, really young. I remember that he came into Yamauchi’s office where there’s a big and very formal conference room. Yamauchi and Arakawa and other people were there.
The door opened and there was a disheveled—I wouldn’t call it disheveled—but he was a little bit disheveled and his hair went in ten different directions. And it was this guy, Miyamoto. At that time, I don’t think I really knew what it was that he had accomplished in creating
Donkey Kong.He had showed us the drawings and the way in which he had come up with the game, but he was working for Mr. Yokoi [the head of engineering] at the time. As I recall, he was new to Nintendo and pretty much a junior guy.
—Howard Lincoln
As they prepared to meet Universal in court, Arakawa offered Lincoln a job at Nintendo. Lincoln accepted. By the time the case went to court, Lincoln was the senior vice president of Nintendo of America, rather than its outside counsel.
The case was heard before Judge Robert W. Sweet of the United States District Court for the Southern District of New York and lasted for seven days, during which time Kirby had a Nintendo employee demonstrate
Donkey Kong
in the court, then compared the game with clips from the movie
King Kong.
As it turned out, Universal Studios did not own King Kong. In fact, Universal’s profit-earning litigation department had recently proved that no one owned the character. In 1975, Universal had taken RKO to court, claiming that the original King Kong was more than forty years old and was now public domain.
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Judge Sweet ruled that Universal’s claims were not valid. Sid Sheinberg’s words about profiting through litigation were repeated somewhat ominously in the judge’s summary of the case.
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Throughout this litigation, Universal knew, as a result of the RKO litigation, that it had no rights to any visual image of King Kong from the classic movie or its remake.
8Nonetheless, Universal, when it seemed beneficial, made sweeping assertions of rights, attempting to extract license agreements from companies incapable of or unwilling to confront Universal’s “profit center.”
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Once Nintendo demonstrated that King Kong was public domain, Universal’s lawyers were unable to demonstrate that remaking
King Kong
gave Universal Studios ownership of it. In the end, no chain of claim was ever delivered, in or out of court. Universal’s lawyers were also unable to prove “the likelihood of confusion between
Donkey Kong
and King Kong,”
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and Universal’s efforts to scare the companies that licensed
Donkey Kong
gave Nintendo grounds to seek extensive damages for lost revenues.
Tiger Electronics did not fare much better than Universal. Judge Sweet ruled that Tiger’s
King Kong
game infringed upon
Donkey Kong
and let Nintendo choose to collect either statutory damages or Universal’s profits from licensing the game. Nintendo chose to collect Universal’s licensing fee, which totaled $56,689.41.
…
Donkey Kong
’s particular expression of a gorilla villain and a carpenter hero (with or without a fire hat) who must dodge various obstacles
(whether bombs or fireballs) while climbing up ladders (whether complete or broken) and picking up prizes (umbrellas and purses) to rescue a fair-haired (whether knotted or pigtailed) hostage from the gorilla is protractible against Universal and its licensees.
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Judge Sweet’s decision cleared Nintendo and placed Universal in the unfortunate position of having to answer to the companies it had threatened. Coleco wanted its royalty money refunded. Atari had agreed to pay royalties on the VCS version of
Donkey Kong
, which came out a few months before the case went to court. After Nintendo won, Atari also demanded its money back. Even Ruby-Spears, the company that did the
Donkey Kong
cartoon show, lodged a claim against Universal Studios.
Tiger Electronics released its
King Kong
game on a cartridge for the Atari VCS and also as a handheld electronic game.
Suffice it to say that when Nintendo won [its] suit from Universal, Coleco went back at Universal and said, “Hey, what about us?” And Universal then bought some Coleco stock and basically as a payback for the moneys that Coleco had paid to Universal on the royalties side.
—Al Kahn
